Performance-based Regulation (PBR) for the Hawaiian Electric Companies (Docket No. 2018-0088)

Background | Key Orders and Filings | Key Past Events | More Information

BACKGROUND

Following a three-year investigation, the Commission established a performance-based regulation (“PBR”) Framework to govern the Hawaiian Electric Companies. This PBR Framework includes a set of alternative regulatory mechanisms encouraging the utility to focus on performance and desired outcomes, such as increasing renewable energy, lowering costs, and improving customer service.

The PBR Framework employs four types of regulatory tools: revenue adjustment mechanisms, performance mechanisms, an innovative pilot process, and safeguards. The revenue adjustment mechanisms set the utility’s target revenues for a five-year period, which are adjusted by a formula that accounts for inflation, a customer dividend, collected revenues, and extraordinary projects. The performance mechanisms include performance incentive mechanisms (“PIMs”) that provide additional revenue opportunities if the utility meets certain performance outcomes, which are supplemented by a portfolio of scorecards and reported metrics to monitor the utility’s progress. The innovative pilot process is a framework for expedited review for pilot projects to incent innovative programs and projects. The safeguards include an Earnings Sharing Mechanism (“ESM”) to protect the utility and customers from excessive earnings or losses and a re-opener mechanism in case the entire PBR Framework (or specific parts) need to be reexamined.

The PBR Framework went into effect on June 1st, 2021 for a five-year period. During this five-year period, the parties involved with developing the PBR Framework have been collaborating through the PBR Working Group on implementation and monitoring efforts, such as the development, review, and modification of PIMs. In the final years of the five-year period, the Commission and the parties shall review the PBR Framework to determine appropriate modifications for the next iteration of the PBR Framework.


KEY ORDERS AND FILINGS

Date Link Summary
December 28, 2023 Order No. 40477 The Commission approved Hawaiian Electric’s request to temporarily suspend two PIMs related to transmission and distribution service reliability and the heat rate provision of the Energy Cost Recovery Clause, for Maui Electric. The temporary suspension is set for August 8, 2023 through June 30, 2024.
December 26, 2023 Order No. 40462 The Commission addressed three PIMs related to Distributed Energy Resources (“DERs”) by allowing the Interim Grid Services PIM to sunset at the end of 2023, allowing the Interconnection Approval PIM to remain effective through 2024, and continuing to examine the Long-Term DER Utilization PIM into 2024 as part of a broader PIM examination.
August 31, 2023 Order No. 40222 In light of the impacts to Hawaiian Electric’s financial condition following the wildfires in Maui in August 2023, the Commission temporarily suspended the Earnings Sharing Mechanism of the PBR Framework pending further information regarding the Companies’ response and related cost recovery efforts to the Maui wildfires.
October 19, 2022 Order No. 38654 The Commission approved Hawaiian Electric’s Innovation Pilot Framework Workplan as a foundation to begin implementing the innovative pilot process for the PBR Framework. The Innovative Pilot Process is monitored in a separate proceeding, Docket No. 2022-0212.
June 17, 2022   Following the Working Group efforts to address the areas of concern set forth in the staff proposal, the Commission established three new PIMs, including the Generation Reliability PIM to incentivize reliable service, the Interconnection Requirements Study PIM to incentivize timely completion of these studies for large-scale projects, and the Conjunctive Shared Savings Mechanism to incentivize cost control over fuel and related costs. The Commission also modified and extended the existing Interim Grid Services PIM through the end of 2023. In addition to these PIMs, the Commission instructed the Companies to prepare and submit two reports: a detailed fossil fuel retirement report for plant retirements through 2026, and a functional integration plan detailing plans and progress to integrate and utilize DERs into the Companies’ operations.
September 17, 2021 Order No. 37969 The Commission introduced a staff proposal identifying several areas of concern and proposed a new slate of PIMs to foster discussion and examination among the PBR Working Group.
May 17, 2021 Decision and Order No. 37787 The Commission established a suite of performance mechanisms, including new PIMs, scorecards, and reported metrics, and outlined next steps in the PBR Docket. The new PIMs included an Interconnection Approval PIM, a Low-to-Moderate Income Energy Efficiency PIM, and an Advanced Metering Infrastructure Utilization PIM. The scorecards and reported metrics address 11 issues: affordability, capital formation, cost control, customer engagement, customer equity, DER asset effectiveness, electrification of transportation, greenhouse gas reduction, grid investment efficiency, interconnection experience, and resilience. These are reported on Hawaiian Electric’s website.
March 23, 2021 Order No. 37696 The Commission approved tariffs to implement the various mechanisms of the PBR Framework.
January 15, 2021 Order No. 37557 The Commission granted Hawaiian Electric’s motion to reconsider portions of Order No. 37507, including the approval of an alternate proposal to determine the Customer Dividend component of the Annual Revenue Adjustment formula.
December 23, 2020 Decision and Order No. 37507 The Commission’s Phase 2 Decision & Order established the PBR Framework to govern Hawaiian Electric. This framework determines the annual revenues for Hawaiian Electric, additional revenue opportunities, the innovative pilot process, safeguards, and the process for implementing the Framework.
May 23, 2019 Decision and Order No. 36326 The Commission’s Phase 1 Decision & Order established the regulatory principles, goals, and outcomes to guide Phase 2 of the PBR investigation, identified a portfolio of PBR mechanisms for priority review, and outlined the Commission’s vision of a comprehensive PBR framework.
February 7, 2019 Staff Proposal Commission staff submitted a staff proposal for the PBR Framework to govern Hawaiian Electric, seeking the parties’ consideration and feedback. The staff proposal discussed the need for regulatory reform, regulatory goals and outcomes to guide PBR in Hawaii, a recommended PBR framework, and next steps in the process.
April 18, 2018 Order No. 35411 The Commission opened the Docket to investigate a PBR Framework to govern Hawaiian Electric. The opening order discussed cost of service regulation and performance-based regulation frameworks, the background and context for Hawaii, a preliminary scope and proposed two-phase process, and next steps for the Docket.


KEY PAST EVENTS

Date and Link (if available) Description Meeting Materials
April 26-27, 2022 Phase 3 Panel Hearing Day 1 Recording

Day 2 Recording
September 21-23, 2020 Phase 2 Panel Hearing Day 1 Recording

Day 2 Recording

Day 3 Recording
August 7, 2019 Phase 2 Workshop Commission Presentation

Hawaiian Electric Presentation

Consumer Advocate Presentation

Ulupono Initiative Presentation

Blue Planet Foundation Presentation

County of Hawaii Presentation

City & County of Honolulu Presentation

Hawaii PV Coalition Presentation
November 28, 2018 Phase 1 Workshop #3 Part 1 Recording

Part 2 Recording
September 27, 2018 Phase 1 Workshop #2 Part 1 Recording

Part 2 Recording

Part 3 Recording
July 23-24, 2018 Phase 1 Workshop #1 Day 1 Recording

Day 2 Recording


MORE INFORMATION

To see more and view all filed documents in the docket, see Docket No. 2018-0088. Hawaiian Electric provides details on its website regarding Performance Scorecards and Metrics, as well as a brief explainer on Performance-Based Regulation.

See related Commission pages:

Updated 8/2024